DRI Healthcare wins target raise at Raymond James

A new acquisition by DRI Healthcare (DRI Healthcare Stock Quote, Chart, News, Analysts, Financials TSX:DHT.UN) is being viewed positively at Raymond James.

On October 2, DRI reported that it had acquired gene-editing technology from Editas Medicine.

“We are excited to further diversify our portfolio into a new therapeutic area,” acting CEO Ali Hedayat said. “The structure of this transaction demonstrates our ability to work with leading innovators to find flexible non-dilutive financing options that enable them to reinvest in their business priorities and continue to develop transformational therapies.”

Raymond James analyst Michael W. Freeman says he likes a lot about this deal.

“We appreciate the innovative deal structure identified and executed by the DRI team here, again demonstrating its skill in crafting monetizaton solutions that uniquely benefit the Trust (predictable cash flows + potential for significant upside) and its counterparties (strategic monetization timing on palatable terms, all non-dilutive), thus escalating its profile as a royalty monetization partner of choice,” he wrote. “And, we appreciate this agreement serving to expose DRI to new areas in the rare disease space; DRI’s royalty portfolio was gradually indexing toward oncology (~1/3 by net book value). Most of all, we appreciate what this deal demonstrates about DRI following after its mid-summer volatility (CEO scandal + resignation): this deal engine is not just intact, it’s firing on all cylinders. On the road to (reputational) redemption we plotted out for the company, DRI has now reached Key Waypoint 2: Execute 3-5 high quality deals without tapping the equity markets. One down, and, we estimate, one more to go before the close of FY24. While the size of the current deal isn’t huge relative to DRI’s past deployments, its quality, in our view, is very high: risk-mitigated structure with solid upside option on a high-potential and high clinical impact drug (at the very beginning of its commercial ramp); foot in the door with a highly innovative partner (DRI has a history of doing repeat deals).”

In a research update to clients on October 4, Freeman maintained his “Outperform 2” rating and raised his price target on the stock from $20.00 to $23.00.

The analyst thinks the company will post EPS of $2.23 per share on revenue of $184.0-million in fiscal 2024. He expects those numbers will improve to EPS of $2.59 on a topline of $202.0-million in fiscal 2025.